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Facts
The assessee filed three appeals against the orders of the CIT(A) pertaining to assessment years 2015-16, 2016-17, and 2020-21. The appeals involved proceedings under Section 153C of the Income-tax Act, 1961.
Held
The Tribunal held that the satisfaction recorded by the Assessing Officer for initiating Section 153C proceedings was improper and lacked clarity on whether the seized material had a bearing on the determination of the assessee's total income. The court relied on a High Court decision that stated such satisfaction is not a mechanical exercise.
Key Issues
The primary issue was the validity of the Section 153C proceedings due to an improper satisfaction recorded by the Assessing Officer. The court examined whether the seized material explicitly had a 'bearing on the determination of the total income'.
Sections Cited
153C, 153A
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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
ORDER PER SATBEER SINGH GODARA, JM These assessee three appeals 1787 & 1788/Del/2025 for assessment years 2015-16, 2016-17 & 2020- 21, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Delhi’s-25 orders, all dated 30.01.2025, having DINs and orders no. ITBA/APL/S/250/2024-25/1072719525(1), ITBA/APL/S/250/2024-25/1072727224(1) and ITBA/APL/S/ 250/2024-25/1072731846(1), involving proceedings under section 153C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Heard both the parties. Case files perused.
2. It emerges during the course of hearing that there arises the first and foremost legal issue of validity of the impugned section 153C proceedings/assessments framed on 31st March, 2023 itself between the parties; for want of a valid satisfaction recorded by the learned lower authorities. There is hardly any dispute that the learned Assessing Officer of the assessee (who happens to be a person other than the searched party) had set into the motion section 153C proceedings herein reading as under: “Reasons for satisfaction for issuing notice u/s 153C of the Income Tax Act, 1961 in the case of Sh. Mukesh Chandra Agrawal (PAN: ABWPA8709M) A search and seizure operation was carried out in the Alankit Group of cases on 18.10.2019 subsequently the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material/ documents related to your case have been found.
Annexure A-1, MCAR, page 1 to 17:- found and seized at 173, Sita Ram Apartments, IP Extension, Delhi wherein copy of Sale deed dated 26.08.2015 in favour of Shri Mukesh Chandra Agrawal found Residential Plot Sale deed made in Agra, Uttar Pradesh, Plot no. 21, Area 166.47 Sq. Mtr. Located in Swapn Lok Kaloni Kakua, Agra by Vishal Infra Pvt Ltd for Sale to Shri Mukesh Chandra Agrawal, Total Value of Property Rs.6,00,000/-.
Annexure A-1, MCAR, page 30 to 46:- found and seized at 173, Sita Ram Apartments ,IP Extension, Delhi wherein copy of Sale deed dated 30.05.2019 of Residential flat in favour of Shri Mukesh Chand Agrawal found copy of Sale Deed in case of Residential Plot Area 138.28 Sq. Mtr Flat no.173, Sitaram Apartment, I P Extention Delhi-92 in favour of Shri Mukesh Chand Agarwal and Smt Neeta Agarwal, by Shri Ajay Tiwari, F14/118, Krishna Nagar, Delhi- 51.Total Value of Property Rs.1,80,00,000/-.
Annexure A-1, MCAR, page 51 to 65:- found and seized at 173, Sita Ram Apartments, IP Extension, Delhi wherein copy of Sale deed dated 21.04.2014 of Residential Plot in favour of Shri Mukesh Chand Agrawal found copy of Residential Plot Sale deed made in Mathura, Uttar Pradesh, Plot Area 166.44 Sq. Mtr. Located in Mauja Bakal pur, Mathura by Agrawal Developers for Sale of Plot 44, Agrawal developers, Mauja Bakalpur, Mathura Total Value of Property Rs. 16,00,000/-. The assessment proceedings are required to be taken u/s 153C of the Income Tax Act, 1961 as the warrant issued in the names of Sh. Alok Agarwal, Sh. Ankit Agarwal, M/s Alankit Ltd. And M/s Alankit Assignment.”
3. That being the case, learned CIT(DR) strongly supports the above satisfaction note inter alia that the same had been properly recorded in light of the relevant incriminating material found/seized during the course of search dated 18.10.2019 which led the Assessing Officer of the said searched party to satisfy himself that the same belonged or pertained or related to the assessee; as the case may be, leading to the Assessing Officer’s satisfaction note finally culminating in the impugned assessment framed in its hands.
Faced with this situation, the tribunal invited the Revenue’s attention to the clinching fact that the learned Assessing Officer’s above extracted satisfaction note has nowhere made it explicitly clear as to whether the relevant seized material had a “bearing on the determination of the total income of such other person”. Learned CIT(DR) seeks to buttress the point herein that such a 3 | P a g e satisfaction note has to be read in totality than after adopting a hyper technical approach.
We find no reason to accept the Revenue’s stand. We make it clear that there is no quarrel between the parties about the learned Assessing Officer of the assessee/third person not having clarified as to whether the relevant seized material had any “bearing………………….” as stipulated in section 153C(1) of the Act. Hon’ble jurisdictional high court’s recent landmark decision in Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Delhi)(HC) has settled the law in the assessee’s favour and against the department that such recording of section 153C satisfaction is not a mere mechanical exercise. We thus draw strong support therefrom to conclude that the learned assessing authority in the assessee’s cases had erred in law and on facts in recording an improper satisfaction before initiating section 153C proceedings which vitiates the assessment itself in above terms. Ordered accordingly. All other remaining pleadings between the parties stand rendered academic.